Starbucks cafe sales heat up

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IOL pic apr25 Starbucks Reuters Picture: Reuters

New York - Starbucks on Thursday reported that quarterly sales at established stores in its US-dominated Americas region accelerated slightly as it attracted more customers, who spent more during each visit.

The results from the world's biggest coffee chain came after McDonald's, Dunkin' Donuts parent Dunkin' Brands and other major US restaurant operators said last quarter's severe winter storms chilled results.

Starbucks executives said the inclement weather also hit its business, but did not quantify the impact.

The company's shares rose 1.9 percent to $72.47 in extended trading.

Global sales at Starbucks cafes open at least 13 months were up 6 percent for the second quarter, versus analysts' average estimate of a 5.4 percent gain, according to Consensus Metrix.

That figure included a 6 percent increase for the Americas region that contributes the majority of Starbucks' revenue. Analysts also expected a 5.4 percent rise from the Americas.

Starbucks' Americas region sales were up 5 percent in the first quarter.

Net earnings rose 9.4 percent to $427 million, or 56 cents per share, for the fiscal second quarter ended March 30, in line with analysts' average estimate complied by Thomson Reuters I/B/E/S.

Starbucks raised its fiscal 2014 earnings per share forecast to a range of $2.62 to $2.68, up from a range of $2.59 to $2.67 previously, after first-quarter results beat internal expectations.

Looking ahead, the company said it would roll out new Fizzio carbonated drinks this summer in the US Sun Belt, as well as in Singapore, Korea and several cities of China.

“I am convinced it will be a big hit with consumers and drive traffic during the key afternoon day part, just as it did in the test markets last summer,” Chief Executive Howard Schultz said on a conference call with analysts.

Oprah Chai, Starbucks' spiced tea partnership with media mogul Oprah Winfrey, goes on sale in the United States and Canada next week.

The chain also is beginning a programme to add evening food and beverages, such as beer and wine, in more than 1 000 cafes in the coming years.

While Starbucks grapples with higher dairy costs, it has locked in coffee prices for the rest of this fiscal year. Its coffee contracts will insulate the company from the recent spike in arabica coffee prices due to worries that the drought in Brazil, the top arabica grower, will crimp supplies.

Starbucks already has 40 percent of its coffee for fiscal 2015 under contract, Chief Operating Officer Troy Alstead told Reuters.

“We are all going to be in a waiting game until we see the (Brazil) harvest come in,” Alstead said. - Reuters

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